Important Super changes
With 1 July just around the corner, a number of new super rules that could impact your financial situation will come into effect.
Superannuation is one of the best ways to grow your wealth, as it provides significant tax concessions which are designed to help you save for retirement. In fact, super now accounts for 17% of household assets and this percentage is projected to grow rapidly in the coming decades.
However, on the back of concerns that people’s savings shouldn’t be unnecessarily eroded by feeds or inappropriate insurance arrangements, the Government has passed a number of new laws that are set to commence from 1 July 2019.
Here’s a breakdown of the most important changes and what you can do to prepare for them.
Consolidation of inactive low-balance super accounts
If you have a super account that hasn’t received a contribution or rollover for 16 months and has a balance below $6,000, this is classified as an inactive low-balance account. These accounts will be transferred to the Australian Taxation Office (ATO), which will then attempt to auto-consolidate those funds into an active account linked to you. However, your account will not be considered an inactive low-balance account if:
- you have satisfied an eligible condition of release, or
- during the previous 16 months, you have:
- chosen to maintain insurance covers
- changed investment options
- made changes to your insurance cover
- made or amended a binding beneficiary nomination, or
- made a written election to the ATO that you’re not an inactive member
Cancellation of insurance in inactive super accounts
Accounts that have remained inactive for 16 months or more will have their insurance switched off unless you let your fund know (by making a valid election) that you want to keep your insurance cover.
An inactive account for this purpose is one where no contribution or rollover has been received for 16 months or more.
This change is to ensure that inactive accounts won’t be eroded by insurance premiums. This is a positive outcome for those who already have insurance in another account, or outside of super.
Abolishment of exit fees
Australians pay on average $68 to leave a super fund. Under the new rules, all super fund exit fees will be banned, which could be another compelling reason to consolidate your super accounts.
These new super rules come into effect from 1 July 2019. It is worth understanding how these changes might affect your financial strategy. To find out more information contact our office and talk to our financial advisers.
The Money Edge | Bundaberg